Transcript: Q&A with Gov. Jerry Brown on the trigger cuts to the 2011-12 state budget

Press conference on the $1 billion trigger cuts to the 2011-12 state budget (Dec. 13, 2011)

Transcript of Q&A with Gov. Jerry Brown on the trigger cuts:

Question: Do you intend to have a budget in January that’s predicated on the assumption that the taxes will pass with triggers that will go into effect automatically if they don’t pass? Is that your plan?

Gov. Jerry Brown: Exactly. That’s my plan.

Question: So you’ll have a $7 billion revenue number in there that may or may not materialize?

Gov. Jerry Brown: Correct.

Question: Assuming it does materialize, have you estimated how much you’re going to have to reduce the budget to…?

Gov. Jerry Brown: I’m not prepared to give those numbers, but it’ll be, you know, many billions that will come in any event – with or without taxes.

Question: Governor, as you looked back on the budget that you signed in Junes, where the revenues clearly haven’t materialized, do you look at it and say, “I thought so. I told you so.” Well, I mean, clearly there was a series of negotiations with you and the legislature. What do you think now in retrospect looking at that budget?

Gov. Jerry Brown: Well, I think that we’re very fortunate that at least we got half the revenue and therefore the trigger cuts are under $1 billion instead of almost $2.5 billion. So we did hope for more, and we got more but not quite as much as we wanted. And it proved the program of not laying off teachers prematurely because it turns out the cuts are far less than they could have been. So I think, by in large, it was much wiser to assume the $4 billion than to make $4 billion in cuts. That would have been immediate devastation to make.

Question: Do you still feel confident in the number that you’re putting out there today?

Brown: Which number?

Question: The new revenue estimates.

Brown: Do I feel…uh…is the Euro going to collapse? Whatever. I mean, economics is an art and a science. We’re talking about the future, so to some extent, it’s prophecy. And I did look in here to how they get their revenue number, and there’s a nice technical explanation. I noticed they used regression analysis. I didn’t go past algebra 2. I do not know what to think of regression analysis. But you depend on that for these revenue things, don’t you? So you’ll have to ask her [Department of Finance Director Ana Matosantos] about the revenue. I think it’s pretty much in the ballpark.

As I said, California gained over $90 billion in income through the state. So this is a state on the move. We’re getting wealthier by the day, but it’s slower than we’d like. And we still got all these people out of work and homes in foreclosure and a lot of other distress. But we’re not Greece – we’re not in a hole that we can’t climb out of. We are climbing out of the little ditch that we fell in over the last couple of years.

Question: Governor, you’ve $1 billion in cuts. The LAO had said that we face a $3 billion deficit at the end of the fiscal year. Are you going to ask for more cuts before the end of this current fiscal year?

Gov. Jerry Brown: I don’t think so. No. Well, you can ask Ana that. But we’ll have more cuts proposed for the next fiscal year that will be in the January budget to be enacted by June 15 [2012] but not between January and June. Barring some world catastrophe, we’ll be able to make it on the money that we have.

Question: Spending is growing by $2 billion a year by the budget estimate. Is there some reason for that? Is that because a lot of have been tied up in the courts or what’s the reason for that?

Ana Matosantos: A lot of it is a question of timing. For example… [indecipherable]

Gov. Jerry Brown: Yeah. Timing. In other words, so the controller…

[Laughter]

The controller looks at certain things a little differently than the finance department. When she gets up here she’ll answer all your questions.

Question: Governor, can you put together a January budget without cuts to K-12? It seems like a lot of the K-12 cuts were avoided with the triggers. As you look to January, is there a way to put this together without cutting schools?

Question: Governor, how are you going to pitch your sales tax, um, your tax initiative proposals to the voters if there are competing measures that also look to increase taxes?

Gov. Jerry Brown: That will be difficult. We’re in conversation with various proponents and we hope that we’ll have a very clear field to run on in November. We’re not there yet. And in fact, if it creates chaos and confusion, that could be difficult. I certainly would like to avoid doubling the cuts, which will be the result if my tax measure fails.

Gov. Jerry Brown: Well, I have a 12-point pension plan which I’m going to press vigorously. I believe it’s imperative for the legislature to pass a credible pension reform that will be right there alongside the tax measure in November.

Question: Well, why no reform as part of your tax measure?

Gov. Jerry Brown: Do you mean like capping the spending?

Question: For example.

Gov. Jerry Brown: Well, right now if you take the Gann limit, which I supported in 1978, I’m advised that we’re $17 billion below the Gann limit. Our problem is our spending relative to the gross domestic product of California is below what it was 30 years ago. So our problem is the floor on which our programs are based – not the ceiling, which they’re rubbing up against.

Question: Governor, can I ask you just one more question about the trigger cuts. The Tier 1 cuts. I mean, those are not small cuts for a lot of working class people.

Gov. Jerry Brown: My message is that California has to exercise fiscal discipline, that we’ve been through a period in this country and in fact throughout Western society of excess, of leverage, of overspending relative to the money that we possess.

And there’s a very simple – I want to invoke a Latin phrase here – ‘memo dat quod non habet.’ It means ‘no man gives what he does not have.’ A state cannot give what it does not have. There’s been a lot of obfuscation and gimmickry, and I’ve reduced that to a minimum if I do say so. I don’t want to rely on pushing the problem further down the road.

We do have some one-time cuts but basically, we’re pulling our budget into line. If you look at the unemployment insurance, we’re $10 billion in the hole there. That’s going to cost us over $400 million a year – that’s real money.

So we can’t go around spending in the way that people would like when the tax revenues don’t generate it. And so we need a real, serious public discussion between now and November [2012] about whether or not people want to spend more. And that’s an open question right now. In fact, there are a number of Republican legislators that would like us to avoid the extra revenue and that would mean real cuts.

Question: In that regard, how successful are you so far or do you intend to be in clearing the field on those tax measures. I assume that you would like to have yours as the only one on the ballot. How are you going to get these people off?

Gov. Jerry Brown: By talking to them.

Question: And have you had any success with that as of yet?

Gov. Jerry Brown: I think one of the groups seems favorably inclined. The others we’re going to have to keep talking…

Question: How about Think Long? Are they going to stay out?

Gov. Jerry Brown: Well, Think Long – I don’t know. They have some of their own issues. They have to work some of their measure to make it more acceptable to certain groups, who if they oppose it, could certainly defeat it.

Question: So who’s not doing it? School unions? Or…

Gov. Jerry Brown: Well, I think there are some issues there on the maintenance factor that have to be adjusted…[indecipherable overlapping question]

Gov. Jerry Brown: I don’t know. I can’t say that. We have been in some discussion but at this point I think she’s somewhat enthusiastic about her proposal.

Question: Governor? Are you going to aggressively court Republicans to put a tax measure on the ballot this year like you did this current year or do you plan on just putting the initiative…

Gov. Jerry Brown: Well, I’m not going to serve my good wine in the way I did earlier in the year.

[Laughter]

Question: So in other words, no, you’re going straight to the ballot and you’re not going to negotiate with the Republicans…

Gov. Jerry Brown: What’s there to negotiate? I mean, there’s these myths that there was a specific pension, regulatory, and cap compromise to be made. It’s not true. First of all, these pension issues are rather complicated. Given the fact the leadership refused to participate, and you had four or five other regular members of opposing caucus talking with me, it became very difficult to work through these technical issues. They’re just difficult.

So I think this courting process doesn’t work unless the leaders want to participate and the terms would have to be such that you can corral the various forces that can defeat a tax measure. So you have to get enough people that you have a reasonable chance to winning. And that means you can only go so far.

Question: Governor, what do you think about the spending cap initiative proposed by Howard Jarvis, CalTax and some others last week?

Gov. Jerry Brown: Well, it would require deeper cuts. I think we know people do not want more cuts in education, more cuts in health care, to the elderly, to public safety – they don’t want them. Now, they don’t want taxes either. So that’s the cognitive dissonance. We also know that most people think the state is wasting a lot of money, and as long as that’s true, it’s very hard to win public support for tax measures. That’s why I’m very happy to see that there is some sentiment, but I don’t take it for granted. I think this is going to be a very difficult campaign to win the revenues.

Question: Can describe the putting the trigger into next year’s budget and what you hope that will pose…?

Gov. Jerry Brown: Because to finance the budget, it has to be credible. When you’re building on the assumption of $7 billion that may or may not arrive, it’s not a credible budget. So the only way it gets credible is if you have automatic trigger cuts. And the way those trigger cuts have credibility – that we execute the trigger cuts we have today.

Question: How does that translate to your election hopes in November in terms of selling it to the public?

Gov. Jerry Brown: Well, people can make a choice, and I think it’s a difficult choice because the complexity of government today with the welter of news makes public discourse on the topic of how much money should the state have and how much should it spend very challenging. So having the trigger cuts at least show what the alternatives are. And today, we’re showing what the first installment of the trigger cuts look like, and then we’ll have a second installment that will materialize – I would hope – in the June budget. If we’re going to get a June budget, which I think we will.

Question: When you proposed taxes last year, the cuts that may come as a result of those failure because you didn’t want people to feel like you’re holding a gun to their head. Wouldn’t that be the effect that these trigger cuts would have?

Gov. Jerry Brown: Well, then what’s the alternative? No budget? Or make all the cuts?

Question: Isn’t that a concern for you now?

Gov. Jerry Brown: Well, do you want $12 billion or $13 billion in cuts in a January budget? I don’t think people want that. They should have a chance to vote on it. The people of California are saying they don’t want cuts. They’re also expressing reservations about taxes. So when that public dissonance and problem – when that’s there, we ought to resolve it by a vote. We can’t resolve it until we get to November. We got to close the budget down in June 15th. The only way we can bridge the gap between June and November is with trigger cuts, as I see it. Also, we can’t finance the budget between June and November unless the trigger cuts are there. So none of this is pleasant.

But the alternative is to do what we’ve done for so many years and that is to just borrow and obfuscate and delay. I don’t want to do that. While the budget won’t be perfect, it’s going to be a lot better than $7 billion before – at least ’til the last few years.

Basically, I think the United States – in Washington – is not exercising fiscal discipline. Many of the cities aren’t stepping up to the plate. I would like, under my watch, to have it said that California met the challenge and we cut and we raised revenue and we created a balance. And after we do that all and after we win in November, as I think we will, it will still be painful because the following year the same groups are going to come out and they’re going to want more spending. As I’ve learned, which maybe I didn’t understand so well the last time I was out here, it’s never going to kind of rest. It’s always going to be managing discontent and rising claims on a reluctant taxpayer. That kind of defines the job. Thanks.

Question: Given that you are going to the ballot and with your experience last year, do you see any need to work with Republicans on the budget this year – this upcoming year?

Gov. Jerry Brown: Well, I always see a need to work with all the legislators. But based on their commitments and as far as I can ascertain, the Republicans – to a person – are committed to not vote to let people vote on a tax or much less vote on a tax. I don’t think that’s what they want to do from their values, their strategies, whatever it is.

So I’ll be glad to talk to them because I think that’s always good to keep the door open, but realistically, I haven’t heard anybody say, ‘You know, I’m likely to do this.’ There’s always people who say, ‘Well, if you abolish in 10 years collective bargaining and do a few other things, I’ll give you a vote.’ But the amount – the ask – to get the tax is so high that we’ll lose on the other side. So the path forward that I charted is the only one that I can see can work.

But I’ll be glad – I’ll talk to them, and I may go to some of their receptions. And if they’re willing to buy, I’ll have a drink with them.

[Laughter]

Because I don’t think it’s appropriate to write anybody off. But I do think, if you look in Washington, we’re pretty polarized in this country. And it seems to me when I look at even – I just think the cleavage is very sharp. And that’s just the way it is, and it’s throughout the whole country on a number of issues. I will try to find places where we agree. You know, the Republicans and I agree that petition-gatherers shouldn’t have to wear a badge. They’re gathering signatures in somebody’s employ. We agree on that. The Democrats disagree. So we’re going to find other things to agree on – a number of things – and I will look for those avenues ‘cause everybody at the end of the day like to do good things for California. I think I’ll stop there.

Question: [First part of question indecipherable]

Gov. Jerry Brown: And they’re the same ones who are arguing to hire more people in the Division of Oil and Gas so we can do more oil drilling in Kern County. We are adding where we need to. We have a health exchange and there are some other areas. So relative to the wealth of California, our spending is low. It hasn’t been this low in many decades. So where would they like less? The universities? The prisons? In health care?

I mean, I think any honest observer will say that the California budget is more constrained than it has been historically, and so we are managing. And if any of these Republicans has some ideas other than just poor people they’d like to take away child care from, I’ll be glad to listen.

Question: Can you offer an observation or just speak about just the mood of the electorate for a moment, given the concerns about income inequality, given the Occupy movement, given this is the electorate that you will be having to talk to in 2012?

Gov. Jerry Brown: I’d say the electorate is frustrated, discontent, not too impressed by government at any level, which was true 30 years ago. But I think it has gotten worse. I think the inequality fuels the demand for more spending, and that’s why the only tax that’s overwhelmingly popular is the tax on wealthier people. But I included the sales tax and I felt we ought to have a more balanced program, which we have.

Question: Don’t they have a point though – those concerns? Especially…

Gov. Jerry Brown: Oh, of course they have a point. The America will have a hard time functioning if the inequality continues. But reversing it in the face of globalization and technological innovation is extremely difficult. And trying to do it through the tax code alone will not work. It’s a real challenge because we know if you look at ancient Rome, it was the same fight between the aristocrats and the plebeians. But it took a few hundred years for the thing to fall apart. So that’s the good news.

[Laughter]

The bad news is – yeah – that we’re polarized and I think it’s more. So this will be a good chance. I’m sure many people will think this is not enough. From the more left progressive point of view, people would like to see more. But I try to find the point that I thought would have a good chance of passing, and there’s still plenty of hostility to taxes. Even though I looked at that poll, there are others that say, ‘It’s going to be a steep climb.’ That’s why I picked my more balanced approach.